On january 1, 2018, whittington stoves issued $820 million of its 6% bonds for $756 million. the bonds were priced to yield 8%. interest is payable semiannually on june 30 and december 31. whittington records interest at the effective rate and elected the option to report these bonds at their fair value. one million dollars of the increase in fair value was due to a change in the general (risk-free) rate of interest. on december 31, 2018, the fair value of the bonds was $772 million as determined by their market value on the nyse. required: 1. prepare the journal entry to record interest on june 30, 2018 (the first interest payment). 2. prepare the journal entry to record interest on december 31, 2018 (the second interest payment). 3. prepare the journal entry to adjust the bonds to their fair value for presentation in the december 31, 2018, balance sheet.

Blue computers, a major pc manufacturer in the united states, currently has plants in kentucky and pennsylvania. the kentucky plant has a capacity of 1 million units a year and the pennsylvania plant has a capacity of 1.5 million units a year. the firm divides the united states into five markets: northeast, southeast, midwest, south, and west. each pc sells for $1,000. the firm anticipates a 50 perc~nt growth in demand (in each region) this year (after which demand will stabilize) and wants to build a plant with a capacity of 1.5 million units per year to accommodate the growth. potential sites being considered are in north carolina and california. currently the firm pays federal, state, and local taxes on the income from each plant. federal taxes are 20 percent of income, and all state and local taxes are 7 percent of income in each state. north carolina has offered to reduce taxes for the next 10 years from 7 percent to 2 percent. blue computers would like to take the tax break into consideration when planning its network. consider income over the next 10 years in your analysis. assume that all costs remain unchanged over the 10 years. use a discount factor of 0.1 for your analysis. annual fixed costs, production and shipping costs per unit, and current regional demand (before the 50 percent growth) are shown in table 5-13. (a) if blue computers sets an objective of minimizing total fixed and variable costs, where should they build the new plant? how should the network be structured? (b) if blue computers sets an objective of maximizing after-tax profits, where should they build the new plant? how should the network be structured? variable production and shipping cost ($/unit) annual fixed cost northeast southeast midwest south west (million$) kentucky 185 180 175 175 200 150 pennsylvania 170 190 180 200 220 200 n. carolina 180 180 185 185 215 150 california 220 220 195 195 175 150 demand ('000 units/month) 700 400 400 300 600